Business Standard

How did balance sheets become healthier?

Bank financing of firm investment has retreated in favour of equity financing

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Illustration: Ajay Mohanty

Ajay Shah
A rise in stock prices is synonymous with an improvement in credit quality. There has been a remarkable rise in stock prices from April 2020 onwards. Synonymous with this is the improvement in the credit quality of Indian financial and non-financial firms. For a very long time, the economy was tormented by the “the twin balance sheet crisis”, but now things are better. How did Indian banking get better? Three elements can be identified: Banks are less important in non-financial firm financing, investment by non-financial firms is subdued, and some of the economic stress of the pandemic may have not
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First Published: Feb 20 2022 | 10:57 PM IST

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